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Rishi Sunak vows to cut income tax to 16%

·Finance Reporter, Yahoo Finance UK
·4-min read
WINCHESTER, ENGLAND - JULY 30: Rishi Sunak, Conservative Party leadership candidate and MP, arrives to speak to a crowd during his campaigning at Manor Farm, on July 30, 2022 in Ropley near Winchester, England. Chris J Ratcliffe/Pool via REUTERS
Rishi Sunak said his vow to slash the basic rate of income tax was 'responsible'. Photo: Chris J Ratcliffe/Pool via Reuters

Tory leadership contender Rishi Sunak has pledged to slash the basic rate of income tax from 20% to 16% if he becomes prime minister.

The move would mean millions of households paying a fifth less in income tax. Those earning the average UK salary of £32,000 would save about £777 under the plans.

This would amount to a 20% tax reduction, the "largest cut to income tax in 30 years", Sunak said.

The former chancellor said the £18bn commitment will be delivered by the end of the next parliament if he wins the contest, meaning 2028.

Sunak said his vow to slash the basic rate of income tax from 20% to 16% within seven years if he becomes prime minister was “responsible”.

He told BBC Radio 4’s Today programme: “I think there’s a huge difference actually between what we’re both saying.

"Now the last week or so of this contest we’ve been focused on the here and now about how best to fight inflation and I think everyone knows where we stand on that and we have different points of view.

Read more: Rishi Sunak vows to cut VAT on household energy bills

“But as chancellor I was very keen to make sure that I started cutting taxes and what I’ve announced today builds on that and that’s because I believe in rewarding work and the best way for the government to signal that is to cut people’s income tax.

"And in this parliament as chancellor I already said we’re going to cut income tax for the first time in almost 15 years and as prime minister I want to go further than that and cut income tax at the basic rate by a fifth to 16p, but I want to do that in a way that’s responsible.

“I want to make sure that we can pay for it, I want to make sure that we can do it alongside growing the economy, so that’s the vision that I have and I think it’s right that people know where I want to take the economy, but it’s entirely different to doing things right now that would make the situation far worse and endanger people’s mortgages which is not something I want to do.”

The move is being seen as the latest attempt for Sunak to revitalise his campaign for Number 10.

Asked if his income tax announcement was a bid to “rescue his position” in the Conservative leadership contest, Sunak said: “No, no, definitely not, this is entirely consistent with what I’ve been saying for a long time.

“That’s why as chancellor I set out a plan to cut income tax in this parliament already, the first penny off the basic rate in almost 15 years was something I announced as chancellor and what I’m talking about today is my desire to go further than that over time and people should know that that’s where I want to take the economy.”

Supporters of his Tory rival Liz Truss have accused the ex-chancellor of flip-flopping on the issue and said that people cannot wait for tax cuts.

Read more: Sunak and Truss's tax plans: What Tory leadership result will mean for your income

Truss has vowed to make cuts from “day one”. She has already promised more than £30bn worth of measures, including reversing April’s hike in national insurance, temporarily suspending the green levy on energy bills, and scrapping a corporation tax hike.

Sunak questioned the wisdom of Liz Truss’s economic approach, which he described as offering a “spree of excessive borrowing”.

He told Today programme: “My point is, I don’t think embarking on a spree of excessive borrowing at a time when inflation and interest rates are already on the rise would be wise.

“I think everyone gets that that is a point of differentiation between us.”

Postal ballots in the race to replace Boris Johnson as Conservative Party leader and prime minister have started being sent out this Monday, giving Tory members the chance to vote early in the race before the result is announced on 5 September.

Watch: Tory leadership race: Rishi Sunak pledges 'radical' tax cut and attacks Liz Truss

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